The variance which is included in absorption costing, but not in variable costing is classified as __________?
Correct answer: A. production volume variance
- A. production volume variance
- B. cost volume variance
- C. profit volume variance
- D. fixed cost variance
Explanation
Absorption costing assigns fixed manufacturing overhead to products, so production volume variance arises when actual output differs from the denominator level. Variable costing treats fixed manufacturing overhead as a period cost and therefore does not include this variance in product costing.
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About Cost Accounting
Cost accounting measures and analyses the cost of producing goods or providing services for planning, control and pricing decisions. It covers direct and indirect costs, fixed and variable costs, job and process costing, break-even analysis, marginal costing, overhead allocation, and the difference between product cost and period cost.
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